GOOD MORNING FROM LONDON
What is the Belt and Road Initiative (BRI)?
Professor Francis Fukiyama one of the world’s foremost historians recently wrote in Foreign Affairs, “This year marks the tenth anniversary of Chinese President Xi Jinping’s Belt and Road Initiative, the largest and most ambitious infrastructure development project in human history. China has lent more than $1 trillion to more than 100 countries through the scheme, dwarfing Western spending in the developing world and stoking anxieties about the spread of Beijing’s power and influence.”
China took the world by surprise in 2013 when it announced BRI. Ports, railways, airports, highways and industrial projects were, and remain, at the heart of the Initiative which President Xi Jinping has described as a “Win-Win” formula. Both sides benefit. China is using its accumulated funds to assist 100+ countries to improve their economies and promote human progress.
Critics of China led by the US have characterised the Initiative as “debt trap diplomacy”; the argument being that an avaricious China has lulled vulnerable third world countries to over-borrow monies to fund the infrastructure development and thereby put their assets at risk of seizure by China when the recipient country is unable to meet its payment obligations.
But this is disputed – and not just by China. Prof Fukiyama, himself says “Many analysts have characterized Chinese lending through the BRI as “debt trap diplomacy” designed to give China leverage over other countries and even seize their infrastructure and resources. After Sri Lanka fell behind on payments for its troubled Hambantota port project in 2017, China obtained a 99-year lease on the property as part of a deal to renegotiate the debt. The agreement sparked concerns in Washington and other Western capitals that Beijing’s real aim was to acquire access to strategic facilities throughout the Indian Ocean, the Persian Gulf, and the Americas.
But over the last few years, a different picture of the BRI has emerged. Many Chinese-financed infrastructure projects have failed to earn the returns that analysts expected. And because the governments that negotiated these projects often agreed to backstop the loans, they have found themselves burdened with huge debt overhangs—unable to secure financing for future projects or even to service the debt they have already accrued. This is true not just of Sri Lanka but also of Argentina, Kenya, Malaysia, Montenegro, Pakistan, Tanzania, and many others.”
Prof Fukiyama highlights the challenge for advanced countries. “The problem for the West was less that China would acquire ports and other strategic properties in developing countries and more that these countries would become dangerously indebted—forced to turn to the International Monetary Fund (IMF) and other Western-backed international financial institutions for help repaying their Chinese loans.
So the asset seizure/debt trap diplomacy explanation has been discredited. It does not apply. The complaint, now, is not that a calculating deceitful China is acquiring assets in countries that have failed to meet their payment obligations but that recipients of Chinese funds have turned to Western lenders for assistance in paying off the loans they have received from China. But is it not the purpose and intent of the IMF and others to promote economic development? They should be pleased that China has initiated the loans that have assisted many developing countries to undertake projects which have as their goal the raising of living standards of their people.
A positive perspective of BRI comes from Albert Muchanga, head of trade and industry for the African Union Commission, the African Union’s Ethiopia-based secretariat who said that President Xi Jinping’s renewed focus on industrialization, agriculture and talent development was just what the continent needs.
“China will continue BRI, at the same time there is a complementary effort to support us in those three areas (industry, agriculture and talent development)… Both came at the right time,” Muchanga said in an interview on the sidelines of last week’s Turkey-Africa Business and Economic Forum in Istanbul. “Africa was making massive investments in developing infrastructure, connectivity, telecommunication systems as well as energy facilities [when BRI launched] and that helped quite a lot.”
Much about China takes the West by surprise – not least the 137m number of Chinese that travelled overseas in 2020, the last pre-Covid year of travel. China is not a modernised version of the old USSR. It is quite different. It intensively studied the decline and fall of the USSR and is determined not to repeat the errors. The Belt and Road Initiative has taken Washington, Paris, Tokyo and Canberra by storm. It surprised them all. There will be more surprises as China approaches 2049 – not least in the area of Artificial Intelligence.